What Are The Basic Technical Indicators?

Basic Technical Indicators

Technical indicators are a tool whose value is derived from the underlying value of a stock or asset. These tools try to foretell the longer term price ranges or just the overall price action. Therefore, they try to predict the future by taking a look at the prior patterns. Examples of indicators are the Relative Strength Index, Money Flow Index, Stochastics, MACD and Bollinger Bands.

What is the definition of technical indicators

As per different schools of thought, technical indicators are a sequence of knowledge factors. These factors can be derived through making use of a formula to the price of the stock or index. Price information contains mainly the open, high, low or closes over a time period. Some indicators use only the closing price, whereas others include volume and open interest in their formulas. The associated price information is entered into the formula and technical information is produced.

As an example, the average of three closing prices of a stock (41 + 42 + 43) / 3 = 42.33 ). This is the average of the past 3 days. But if we continuously calculate the average of the past 3 days, the oldest data gets replaced by new data. In this way, we can create moving averages. For technical analysis reasons, technical indicators are frequently used in graphs or charts above or below a stock’s price chart.

Example of technical indicators in Indian charting platforms

On Zerodha Kite

Zerodha has a very fluid and user-friendly trading platform named Zerodha Kite. Kite is a platform for web trading as well as trading through Android enabled mobile smartphones. It is equipped with all popular technical indicators to facilitate trading and enable traders to trade better allowing leeway for maximum winning trades. The list of Zerodha Kite Indicators is detailed below. All the following indicators are equipped with customizable parameters to suit the individual requirement of traders besides having default values.

Zerodha Kite Indicators List

List of technical indicators on Zerodha Kite

Other brokers like Upstox also have these indicators in their trading platform Upstox Pro. Other stockbrokers are also upgrading their trading terminals to include better charts for better analysis.

Types of technical indicators

There are 2 types of technical indicators. Leading and lagging indicators. Let us check how to distinguish between these 2 types.

Leading indicators

Leading indicators try to lead the price action. They are predictive in nature, which means they try to predict future price action. An example of a leading indicator is RSI. If the RSI tops it is called the market is overbought. That is an indication that the market can correct from there. Though it is not a sure thing, but many times price corrects from there. Therefore, RSI leads the price and is a leading indicator.

Lagging Indicators

The lagging indicators lag the price action. In this case price leads and the indicators follow the price. Suppose a moving average. The price moves and the moving average moves according to the price. The lagging indicator can give a late signal but many times their signals are more accurate.

Technical indicators PDF ebook

We’re sharing a FREE e-book on the basic technical indicators. You may download the FREE e-book by clicking the download button below. However, you need to use any of the social share buttons to unlock your download.

Conclusion

Traders need technical indicators to analyze the market. These indicators provide trading direction to the traders. Some indicators are leading and some are lagging. Nowadays indicators are available in all major stockbroking platforms. So traders do not need to purchase cost charting software like AmiBroker extra.

Author: Indrajit Mukherjee

Indrajit is a professional blogger and trading system developer. Amibroker expert, Wordpress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.

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